Five years ago, Steve
Steinour took over a bank that was gasping under the weight of a half-billion
dollars in mortgage losses and taking out emergency loans from the Federal
Reserve more often than most of us go to the ATM.

It would have seemed that
Steinour couldn't have picked a more precarious time to become CEO of
Huntington Bank of Columbus back in early 2009. He had been CEO of Citizens
Financial in Rhode Island, which was three times larger than Huntington.

Little did Steinour know the
worst of the housing crisis was yet to come and, within a month of becoming
Huntington's CEO, the company's stock would drop by nearly 90 percent to a mere
$1 a share, and, within two months of his appointment, the bank would post a
massive quarterly loss of $2.4 billion.

Unfazed, Steinour within a
year unveiled a new warm-and-fuzzy attitude that would scare the heck out of
banks nationwide.

How about, instead of
grabbing every fee possible from a customer, maybe the bank could forgive
penalty fees and offer free checking accounts for everyone with no minimum balance?

How about, instead of
laughing at small companies that wanted to borrow money in a crippled economy,
maybe the bank could open the floodgates and lend as much money to small
businesses as possible?

How about, at a time that
banks were trying to cut costs and customers were doing more banking with their
computers and phones, maybe the bank would open more than 100 new branches in
Ohio, extend its branch hours past dinnertime and be open on Saturdays and
Sundays too?

Over the last five years, the question around The
Steinour Experiment seemed to come down to this:

Could you be a nice guy and
make money too?

It's a question that
customers of all Cleveland banks should care about because Huntington and its
policies are being watched by many competitors and replicated by a few.

Today, Huntington has become
the largest bank in Ohio in terms of branches, profits have doubled since 2010
to $639 million, and Huntington's small business lending has tripled, making it
the third-largest SBA lender in the nation.

"He rescued this ship off the
rocks," said banking analyst Jeff Davis of
Mercer Capital in Nashville. "Huntington wasn't in danger of failure, but they were in a
really tough spot in 2009."

While there is much for Steinour to
revel in, some things haven't gone as planned:

Instead of increasing employment by
thousands, Huntington's workforce is flat compared with four years ago and
actually dropped last year. In Northeast Ohio, where Huntington vowed to add
hundreds of jobs, employment is up by only 100 in the last five years, to
1,700.

Steinour in 2010 promised to keep every
branch in Greater Cleveland open every day of the week, including Sundays. As
of this month, the branches not located in stores are closing on Sundays.

Huntington has fallen behind
some of its peers in developing technology, such as person-to-person payments.

Steinour, 55, is
matter-of-fact: He says his moves haven't been perfect but he likes where
Huntington, one of the nation's 25 largest banks, sits right now.

"We're taking a long-term
view," Steinour said in an interview last month. "The healthier that Cleveland
is, the healthier that Ohio is, the better we do as a company. We think it pays
back over time."

That long-term view hinges on
a very simple premise, said banking analyst Terry McEvoy: The economy has
largely stunk the last few years. But Huntington has focused on gaining
checking account customers and gaining loyalty.

That way, when the economy
does rebound and people are ready to borrow again, they might first turn to
that bank that has been nice to them all of these years, said McEvoy, who's
with Oppenheimer & Co. in Maine.

Huntington has focused heavily
on its "asterisk-free checking," with no monthly fees, no requirements for
direct-deposit, no minimum balances, no minimum transactions. "It really sells
because there's no fine print," Steinour said.

It also rolled out its
24-hour grace period on checking overdraft fees: The bank notifies you by text or email if your account goes negative. If you get your account into the
black within 24 hours and there's no penalty fee. When it started in 2010, the
new policy cost Huntington $2 million in revenue a month. The also introduced a
grace period on late payments on its just-launched credit card.

While no other major banks
have adopted an overdraft fee grace period, banks such as Chase, Fifth Third, PNC, U.S. Bank and Ohio Savings now waive fees on overdrafts
of $5 or less.

Finally, Huntington last year
changed its policy covering the order in which transactions clear an account. Clearing
the largest ones first could cause several smaller ones to bounce, leading to more
overdrafts at $35 each. The new policy: Items clear mostly in chronological
order, without regard to the dollar size of the transactions. This leads to
fewer overdraft fees. This move cost Huntington about $30 million last year.

"We didn't have to do
that," Steinour said. "We thought it was the fair thing for our customers. And
good for us over the long term."

Huntington was one of the
first local banks to adopt this policy, behind PNC.

KeyCorp, Cleveland's largest
bank, shifted to this more fair way of clearing items in November, and other
banks have followed suit too.

Key Chairman and CEO Beth
Mooney said Key had planned the change long before Huntington or any other
banks made the shift. Mooney also noted that Key has a free checking account
and other consumer-friendly products like Huntington. When asked about
Steinour's consumer approach, Mooney said Huntington isn't necessarily much
different than Key or other banks, but said she does give credit to Huntington
for its marketing.

Steinour doesn't apologize
for the marketing. But he said you can market all that you want and it won't
turn into business unless you're good.

"This has been an
experiment," Steinour said. "It's never been done before."

So far, so good. Huntington's customer base for checking
has soared from 900,000 to 1.3 million in the last five years.

One of Huntington's new customers is Alton Roberts of Cleveland. The entrepreneur hadn't been looking to change from one of Huntington's big competitors. But Huntington promised to help him with financing for a building -- something no other local bank had been willing to do, despite his good credit rating.

Roberts was able to get rid of a $1,400-a-month land contract and get a loan from Huntington with a payment of only $400 a month. That $1,000 a month is huge to him. "That will make a big difference in my business this year."

He got a discount for being a Vietnam veteran and also got a better interest rate on his business credit line. "They gave me better everything," he said.

Roberts, 64, has a cell phone store and bill payment service and is remodeling apartments for war veterans. He's so pleased with Huntington that he moved all five of his personal and business accounts.

Steinour said Huntington wanted to
distinguish itself from its competitors and generate a ton of good will. "At
the end of the day, we made a strategic decision to become a great consumer
bank and great business bank."

Huntington's road to profitability:

2009: Loss of $3.1 billion

2010: Profit of $312 million

2011: Profit of $543 million

2012: Profit of $641 million

2013: Profit of $639 million

McEvoy, the Oppenheimer
analyst, said Huntington took an interesting path as it tried to recover from a
horrendous acquisition, SkyBank in 2007, which caused a half-billion dollars in
losses from subprime mortgages.

That's likely the reason Huntington Bank in 2008 took out 15
emergency loans totaling more than $1 billion from the Federal Reserve, more than any other bank in Ohio. Twelve of the loans were just overnight loans to get the bank through 24 hours.

Huntington quickly "turned on the
growth switch" in three unlikely places, McEvoy said:

It took a chance on boosting
middle-market lending in the hard-hit manufacturing sector.

It expanded its relationships
with auto dealers to do auto lending, long before consumers started buying cars
again.

And it expanded into
Michigan, an economy that had been crushed by job losses and foreclosures.

"When Michigan was a nasty
word, they were willing to go against it," McEvoy said.

Dan Walsh, president of the Cleveland region of Huntington, said it's a credit to Steinour that he allows the 11 regional presidents to run their areas according to what's best for their market. Cleveland is more focused on manufacturing and health-care, and does more asset-based lending than any other region. It also has specialized in real estate development as part of Walsh called the downtown renaissance.

The overall results can be seen in
the bottom line: Huntington went from a loss of $3.1 billion in 2009 to a
profit of $312 million in 2010. Profits jumped by 74 percent and 18 percent in 2011 and 2012.

In one big measure of
profitability, Steinour notes that Huntington went from being in the bottom 10
percent of banks on profits compared to assets in 2009. By 2012, it was in the
top 25 percent.

Davis, the Nashville analyst,
said that Steinour has turned lots of investors and analysts into believers. "I
don't think you're going to find anyone on Wall Street who will give Steinour
bad marks."

One of the big questions,
however, is the modest job creation when Steinour had hoped for much more.
There are two reasons Huntington has fallen short.

First:
"We never expected the recovery to be so sluggish for so long," Steinour said.

And
second: "You're seeing technology substitute out jobs."

Davis
wonders whether the growing popularity of technological toys could squeeze
Huntington's vast branch network, which is the largest in Ohio.

"The
industry has a huge cost structure issue with these branches," he said. "With
branches in general, I think a lot of them are going to have to go dark."

Steinour
doesn't entertain closing branches, although the bank this month has changed
its mind and started to close its 57 stand-alone branches in Greater Cleveland
on Sundays, while keeping the 35 in-store branches open.

Steinour
said he wants to invest more money in technology -- such as mobile payments or
person-to-person transactions. He won't discuss details but said announcements
will be coming later this year.

Huntington
also plans more dramatic announcements regarding fees it will reduce or
eliminate, Steinour told analysts last month. He wouldn't say anything except
that they would fit in with the same "fair-play" strategy.

One
of the big challenges for Huntington in the short term: It now has to
participate in the Federal Reserve's so-called stress tests, which are imposed
on the nation's largest banks. This will place Huntington under more scrutiny
and more restrictions as far as capital reserves, dividends to shareholders and
acquisitions.

An
acquisition -- or being acquired -- is something that Davis thinks might be in
Huntington's future.

"The unanswered question is, are there some
deals Huntington needs to do," Davis said. "Or would there ever be a merger
between Huntington and KeyCorp, or Huntington and Fifth Third?" Both Key and Fifth Third are larger than Huntington.

Those
are the questions that go back at least a decade.

Unlike
some CEOs, Steinour will answer them broadly. "We've been clear over the years.
Were interested in buying and expanding," he said. "But you have to have the
usual fiduciary carve-off -- If somebody wanted to offer us an exorbitant price
(to buy the bank,) we'd have to look at it . . . But we're a buyer."

Sun News Feature

It’s Your Business is a Sun News feature compiled by the business owners themselves to spotlight local small or new businesses on topics such as the business’ specialty product or service, history and any plans for the future. ... Tell us about your business»

Follow Us

cleveland.com is powered by Plain Dealer Publishing Co. and Northeast Ohio Media Group. All rights reserved (About Us).The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of Northeast Ohio Media Group LLC.